Rangel's Taxes

Editorial of The New York Sun | September 11, 2008

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In March of 1938, President Franklin Roosevelt sent a letter to his commissioner of internal revenue, Guy Helvering. "My dear Commissioner Helvering," the letter began, "I am enclosing my income tax return for the calendar year 1937, together with my check for $15,000. I am wholly unable to figure out the amount of the tax ..." In the letter, which is reproduced in Amity Shlaes's book "The Forgotten Man," the president asks the Internal Revenue Service to answer the "problem in higher math" on its own, and send him a bill for the remainder.

Well, the tax code hasn't gotten any simpler since then. On the contrary, it has grown radically more complex. And the latest public official to find himself flabbergasted by the complexities of the laws is none other than the chairman of the tax-writing Ways and Means Committee itself, Rep. Charles Rangel. To sort out his taxes it took the New York Times, which has worked itself up into a lather on the matter even bigger than the one it worked itself up into over Mr. Rangel's rent-stabilized apartment and his efforts to help City College.

According to a "fact sheet" offered up yesterday on Capitol Hill, Mr. Rangel's villa at the Punta Cana Resort and Yacht Club "was considered an investment rather than a vacation home, entitling him to deduct depreciation and receive a dollar-for-dollar tax credit in the United States for income taxes withheld and paid in the Dominican Republic," which, the "fact sheet" goes on to say, are imposed at a rate of "around 25% - 30%."

Got that? If it isn't clear enough, consider that New York City and state have different rules than the federal government do, and that Dominican Republic income taxes "are not credited in state and city taxes as they are in federal taxes." All of which tends to support the point that if Mr. Rangel wanted a vacation home, he should have made like the Clintons and borrowed one, or made like Senator Moynihan and had one upstate, or made like Senator Dole and bought a condominium in Miami.

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Or — and here is where this editorial is going — else use his position to adjust the tax laws so that they are simpler for those many Americans less sophisticated than Mr. Rangel to understand and comply with. For if not even the chairman of the Ways and Means Committee can get his taxes right, what hope is there for the rest of us? This is a serious policy point. The right move for Mr. Rangel is to get on the phone with Steve Forbes, the leading advocate of the reform of the flat tax, and the two of them have lunch. It will not only illuminate for the man who is likely to be steering the tax-writing committee in Congress for years to come the principles and virtues of the flat tax. But it will underscore a point that Mr. Rangel can appreciate on a personal level. He actually thinks deeply about the tax code — we learned that over breakfast with him — and his friends on the left want little but to make him look like the crook that he isn't, while the activists on the right want a tax code that is simpler, fairer, and allows the operation of incentives that provide growth.

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I'm of two minds here. Either Senator Rangel is completely cornfuzzled by the Income Tax laws - which he himself helped write - or, he's trying to bamboozle someone into thinking he didn't understand what he was doing. Or rather, wasn't doing. Is he confused or trying to evade paying taxes? A sitting US Senator? The Chairman of the Ways and Means Committee?

Perhaps it's time, since Senator Rangel claims to not understand the very laws he is writing, for him to step down from the chairmanship. Perhaps it's time that we admit that if the tax laws are this confusing, it's time to scrap the system and start off fresh with something easier to understand. Like the Fair Tax.

How much easier could the tax system be under the FairTax? You purchase something new and pay tax. You purchased used, such as a house or car, and pay no tax. You control the taxes you pay by the purchases you make.

No Federal payroll taxes taken from your paycheck, no forms to file, no records to keep. And you get a deposit into your bank account to pay the amount of tax (up to the poverty level) you would pay. You keep more of your paycheck, you don't file any paperwork, and you get a check to help pay some of your taxes.

And, all entitlement programs such as Medicare, Medicaid, and Social Security are fully funded. There will probably be enough to fund a heck of a universal health care system. Our economy would be booming, and we'd be the envy of the world.

What could be better? It would certainly be easier for Senator Rangel to understand. Senator Rangel? What say you?